Customer and Supplier Intimacy with Information Systems

Strengthening Customer and Supplier Intimacy

• Information systems can develop strong ties and loyalty with customers and suppliers by increasing switching costs
• Examples of firms that use information systems to facilitate direct access by suppliers include Toyota, Ford, and other automobile manufacturers
• Amazon uses information systems to keep track of user preferences and recommend titles purchased by others to its customers

The Internet's Impact on Competitive Advantage

• The Internet has transformed or threatened various industries, including travel agency, printed encyclopedia, media, retail, music, book, retail brokerage, software, telecommunications, and newspaper industries
• The Internet has increased competitive rivalry, making it easy for rivals to compete on price alone and for new competitors to enter the market
• Profits have been dampened due to the Internet, but it has also created new markets and opportunities for building brands with loyal customer bases

Smart Products and the Internet of Things

• The Internet of Things (IoT) involves the growing use of Internet-connected sensors in products
• Smart products offer new functionality, reliability, and intense use of products while providing detailed information that can improve products and customer experience
• Examples of smart products include fitness equipment and health trackers
• Smart products expand opportunities for product and service differentiation, increasing rivalry among firms
• They raise switching costs and inhibit new entrants to a market, and may decrease the power of suppliers of physical components

The Business Value Chain Model

• The value chain model highlights activities in a business where competitive strategies can be applied and where information systems have a strategic impact
• It identifies specific, critical leverage points where competitive strategies can be applied